“Natural Resources: a Blessing or Curse?” was the discussion theme which was held some time ago in Jakarta. The discussion was hosted by the Melbourne Business School (MBS) in collaboration with the University of Indonesia Center for the Study of Governance (UI-CSG). This theme was particularly interesting for Indonesia because of two things. First, Indonesia’s economical structure is currently still dependant on natural resource exploitation activities (the extractive industry). Second, the weakening global economic situation has resulted in the significant decrease in demand of natural resources, thus implicating on the decline of Indonesia’s economic performance.

During the discussion, Mark Crosby – a panelist from MBS – mentioned several factors that caused the failure of natural resource maintenance which are potential in causing the destruction of a country’s economy, even causing social dishonor towards the country itself. From the three factors mentioned, one of the causing factors interesting to reflect upon during this situation is how weak state institutions are in maintaining natural resources which they possess themselves. The weakness of state institutions is marked by the high number of corruption practice in the managing of natural resources. The exposing of this led to a deep anxiety which overcame the Indonesian audience, which convinced that corruption in the natural resources sector – one of the sectors mentioned – does exist and is massive. This anxiety should continue towards thinking of steps needed to be taken to prevent the manifestation of the natural resources curse towards the Indonesian economy, and rather, turn it into a blessing.

Transparencyaan Initial Step

In 2013, the Revenue Watch Indonesia (RWI) issued the Resource Governance Index (RGI), an index on a country’s management of transparency and accountability towards maintenance of their natural resources (oil, gas and minerals). In the 2013 RGI, Indonesia placed at 14th out of 58 countries with a composite score of 66 out of the maximum of 98 and minimum of 51; a position which is one level below Timor Leste. The RGI covers four indicators. From the four, Indonesia scored 66 in reporting practices. The reporting practices indicator is a combination of the transparency indicator in terms of reserves, income amount, and contract publication between the Government and Oil and Gas Companies. Although it cannot be said that Indonesia is in a low position in reporting practices, one essential element from the overall openness of the reporting practices indicator – namely the contract publications – Indonesia received a 0 score. Especially since Timor Leste scored 67 and Australia (Western Australia) received 100.

Contract publication is essential in the transparency of natural resources maintenance. In the 2013 RGI Recommendations, RWI emphasized that contract publication is an important factor towards creating public participation in conducting evaluation: whether the public is getting a good position in natural resources maintenance, which also functions as a public instrument of control to monitor and oversee the implementations of the obligations stated in the contract. The opacity in implementing public affairs is a recipe for the proliferation of corruption practices in the conduct of those affairs. In the sector of natural resources maintenance, allegations of natural resources maintenance implementation practices had been heard since quite some time, and have even been taken into consideration by the Constitutional Court towards assessing the constitutionality of the Implementing Body for Upstream Oil and Gas Business Activities in 2012. Not even one year passed since the Constitutional Court regulations, their considerations were confirmed with the arrest of Rudi Rubiandini, Chairman of the Special Task Force for Upstream Oil and Gas Business Activities / SKK Migas (formerly known as the Implementing Body for Upstream Oil and Gas Business Activities / BP Migas) by the Corruption Eradication Commission / KPK.

Unconstitutional Confidentiality

One of the main argumentations often brought up by bureaucrats and natural resource management companies who support contract confidentiality is that the confidentiality of a contract is a part of trade confidentiality. Of course this argumentation sounds absurd and is not based on the law if we understand the main foundation of oil and gas management in Indonesia, namely Article 33 of the 1945 Constitution. Article 33 of the 1945 Constitution firmly states that the ownership of natural resources is not private, but public. The role of the state and business entities act as mandated trustees towards the maximum prosperity of the people. The phrase “prosperity of the people” affirms that the final beneficiaries from natural resource management are the people/public.

This juridical construction was affirmed in the contract definition as stated in the regulations towards natural resource management, that the contracts for natural resource management are a controlling instrument whose preparation stress on state profit towards the maximum prosperity of the people. The juridical consequence from the mentioned regulation is the emergence of obligations from the management (state/company bureaucrats) to provide crystal clear information regarding management implementation they have conducted in the field of managing natural resources to the people as final beneficiaries from profits made from natural resource management. Confidentiality in natural resource management, including Contracts, contradicts with the constitution. This is a form of denial towards the fact that the people are final beneficiaries. The people have the right to obtain information regarding the management conducted by the Government, including the publication of contracts compiled relating to natural resource cultivation.

This situation of opacity should not be maintained further. The arrest of Rudi Rubiandini is not only a window of opportunity for dismantling cases in the natural resources sector, but is also the perfect moment for trustees in oil and gas management (the Government and companies) to increase transparency and accountability in the management of the Indonesian people’s natural resources. In fact, more than that, openness and transparency is the first step and also a strategic choice in preventing the manifestation of Indonesia’s natural resources as a curse and turning around the direction of Indonesia’s natural resource management towards becoming a blessing for all of Indonesia’s people.

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